Wilson v. Hunam Inn, Inc. , 126 F. Supp. 3d 1 ( 2015 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
_______________________________
)
SARA WILSON, )
On behalf of herself and all )
others similarly situated, )
)
Plaintiff, )
) Civ. Action No. 14-1522 (EGS)
v. )
)
HUNAM INN, INC., et al. )
)
Defendants. )
)
MEMORANDUM OPINION
Plaintiff Sara Wilson, on behalf of herself and all others
similarly situated, brings this action against Defendant Hunam
Inn, Inc., and individual Defendants Donald Eric Little, and
David Perruzza, alleging violations of the Fair Labor Standards
Act (FLSA), 29 U.S.C. § 201 et seq., and the D.C. Minimum Wage
Act (DCMWA), D.C. Code § 32-1001 et seq. Defendants move for
partial dismissal of Ms. Wilson’s complaint, or in the
alternative, for partial summary judgment. Upon consideration of
the motion, the response and reply thereto, the entire record,
and the applicable law, Defendants’ motion is DENIED.
I. BACKGROUND
Ms. Wilson is a former bartender at a D.C. nightclub
operated by Defendant Human Inn, Inc. Compl., ECF No. 1 at ¶¶ 1,
2. Human Inn, Inc. is a D.C. corporation doing business under
the names “Cobalt” and “30 Degrees.” Id. at ¶ 2. Defendant
Donald Eric Little is the sole owner and President of Human Inn,
Inc. Id. at ¶ 3; see also Defs.’ Mot., ECF No. 8-2 at ¶ 3.
Defendant David Perruzza is a corporate officer at Human Inn,
Inc., whose responsibilities include signing payroll checks.
Compl., ECF No. 1 at ¶ 4; Defs.’ Mot. at 8-2 at ¶ 4.
Ms. Wilson alleges that while employed as a bartender at
Cobalt, she was not paid minimum wage or overtime. Compl., ECF
No. 1, at ¶¶ 14, 15. Ms. Wilson alleges that her employers used
an invalid “tip pooling” arrangement to avoid paying their
employees minimum wage. Id. at ¶¶ 18, 53, 55. While under
certain circumstances the FLSA allows employers to pay “tipped
employees” at an hourly rate below the minimum wage, Ms. Wilson
argues that the tip pooling arrangement used at Cobalt failed to
meet the statutory criteria. Id. at 56. First, Ms. Wilson
alleges that under the tip pool system, she and the other
bartenders were forced to share their tips with non-tipped
employees, such as “bar backs” and “floor employees,” who do not
ordinarily receive tips from customers. Id. at ¶ 55. Second, at
some point during Ms. Wilson’s employ with Cobalt, the
nightclub’s cleaning staff was fired and Ms. Wilson and the
other bartenders were required to assume additional cleaning
duties, such as cleaning the nightclub bathrooms. Id. at ¶¶ 18-
19. Ms. Wilson argues that these additional cleaning duties
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were not exempt from the minimum wage requirement and that the
bartenders should have been paid minimum wage for time spent
performing this work. Id. at ¶ 18. She further alleges that the
Defendants failed to provide her adequate notice that she would
be compensated under the “tipped employee” exemption to the
FLSA’s minimum wage requirement. Id. at ¶ 60. Finally, Ms.
Wilson alleges that she worked an average of 32 to 42 hours per
week, but was not compensated for overtime work. Id. at ¶ 19.
On October 21, 2014, Defendants moved for partial dismissal
of the Plaintiff’s complaint pursuant to Federal Rule of Civil
Procedure 12(b)(6), or in the alternative, for partial summary
judgment pursuant to Rule 56. Defs.’ Mot., ECF No. 8-3.
Defendants first move to dismiss Plaintiff’s complaint as to Mr.
Little and Mr. Perruzza, arguing that Mr. Little and Mr.
Perruzza are not “employers” under the FLSA or DCMWA and
therefore not liable under the law. Id. at 6-8. Second,
Defendants argue that Ms. Wilson has failed to sufficiently
plead a “willful” violation of the FLSA, and that therefore,
Plaintiff’s “third year” FLSA claims should be dismissed. Id. at
8-9.
In the alternative, Defendants move for partial summary
judgment. First, Defendants argue that Ms. Wilson never worked
more than 40 hours per week and therefore, the Court should
grant summary judgment for the Defendants on Ms. Wilson’s
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overtime claims under the FLSA and DCMWA. Defs.’ Mot., ECF No.
8-3 at 10-11. Second, Defendants rearticulate their claims that
Mr. Little and Mr. Perruzza are not Ms. Wilson’s employers and
seek summary judgment as to themselves individually. Id. at 13-
16.
II. STANDARDS OF REVIEW
A. Motion to Dismiss
A motion to dismiss under Federal Rule of Civil Procedure
12(b)(6) “tests the legal sufficiency of a complaint.” Browning
v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002). A complaint must
contain a “short and plain statement of the claim showing that
the pleader is entitled to relief, in order to give the
[D]efendant fair notice of what the . . . claim is and the
grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007) (internal quotation marks omitted). While
detailed factual allegations are not necessary, Plaintiff must
plead enough facts to “raise a right to relief above the
speculative level.” Id.
When ruling on a Rule 12(b)(6) motion, the court may
consider “the facts alleged in the complaint, documents attached
as exhibits or incorporated by reference in the complaint, and
matters about which the Court may take judicial notice.”
Gustave-Schmidt v. Chao, 226 F. Supp. 2d 191, 196 (D.D.C. 2002).
The court must construe the complaint liberally in Plaintiff’s
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favor and grant Plaintiff the benefit of all reasonable
inferences deriving from the complaint. Kowal v. MCI Commc’ns
Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). The Court must not
accept inferences that are “unsupported by the facts set out in
the complaint.” Id. “Nor must the court accept legal conclusions
cast in the form of factual allegations.” Id. “[O]nly a
complaint that states a plausible claim for relief survives a
motion to dismiss.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).
B. Motion for Summary Judgment
Summary judgment is appropriate “if the movant shows that
there is no genuine dispute as to any material fact and that the
movant is entitled to judgment as a matter of law.” Fed. R. Civ.
P. 56(a). The party seeking summary judgment bears the “initial
responsibility of informing the district court of the basis for
its motion, and identifying those portions of the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, which it believes
demonstrate the absence of a genuine issue of material fact.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)(internal
quotation marks omitted). To defeat summary judgment, the non-
moving party must “designate specific facts showing there is a
genuine issue for trial”. Id. at 324. A dispute is “genuine”
only if a reasonable fact-finder could find for the non-moving
party; a fact is only “material” if it is capable of affecting
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the outcome of the litigation. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986); Laningham v. U.S. Navy, 813 F.2d 1236,
1241 (D.C. Cir. 1987). In considering whether there is a genuine
dispute as to material fact, the court must draw all reasonable
inferences in favor of the non-moving party. Tao v. Freeh, 27
F.3d 635, 638 (D.C. Cir. 1994).
III. ANALYSIS
A. Ms. Wilson has sufficiently pleaded that Mr. Little and
Mr. Perruzza are her employers under the FLSA and DCMWA
Mr. Little and Mr. Perruzza argue that Ms. Wilson’s
allegations are insufficient to establish that they were her
“employers” under the FLSA or DCMWA. Defs.’ Mot., ECF No. 8-3 at
6. Accordingly, the individual Defendants seek dismissal of the
complaint. 1 The FLSA defines employer to include “any person
acting directly or indirectly in the interest of the employer in
relation to any employee. . .” 29 U.S.C. § 203(d). The DCMWA
contains nearly identical language. See D.C. Code § 32-1002
(“The term ‘employer’ includes any individual, partnership,
association, corporation, business trust, or any other person or
group of persons acting directly or indirectly in the interest
of an employer in relation to an employee. . .”). Accordingly,
courts construe the federal and local statues coterminously for
1 Hunam Inn, Inc. does not dispute that it was Ms. Wilson’s
employer.
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purposes of determining who is liable as an employer. See
Guevara v. Ischia, Inc., 47 F. Supp. 3d 23, 26 (D.D.C. 2014);
Villar v. Flynn Architectural Finishes, Inc., 664 F. Supp. 2d
94, 96 (D.D.C. 2009).
The Supreme Court has emphasized the “expansiveness of the
Act’s definition of ‘employer.’” Falk v. Brennan, 414 U.S. 190,
195 (1973). Indeed, the definition of employer is “necessarily a
broad one in accordance with the remedial purpose of the Act.”
Morrison v. Int’l Programs Consortium, 253 F.3d 5, 11 (D.C. Cir.
2001). 2 In determining whether a party should bear liability as
an employer, courts look to the “economic reality” of the
employment relationship. Morrison, 253 F.3d at 10-11. Courts
must assess the “totality of the circumstances,” considering
factors such as whether the putative employer (1) had the power
to hire and fire the employees; (2) supervised and controlled
employee work; (3) determined the rate and method of payment,
and (4) maintained employment records. Id. at 11 (quoting
Henthorn v. Dept of Navy, 29 F.3d 682, 684 (D.C. Cir. 1994)).
2See also United States v. Rosenwasser, 323 U.S. 360, 361 (1945)
(“[t]his legislation was designed to raise substandard wages and
to give additional compensation for overtime work as to those
employees within its ambit, thereby helping to protect this
nation ‘from the evils and dangers resulting from wages too low
to buy the bare necessities of life and from long hours of work
injurious to health.’” (Quoting S. Rep. No. 75-844, at 4
(1937)).
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An employee may have more than one employer under the FLSA.
Ventura v. Bebo Foods, Inc., 739 F. Supp. 2d 1, 5 (D.D.C. 2010).
Application of the economic reality test may demonstrate that
corporate officers, along with the corporation itself, are
liable as employers. Id. Indeed, the “overwhelming weight of
authority” considers a corporate officer with “operational
control of a corporation’s covered enterprise” an employer under
the FLSA. See Ruffin v. New Destination, 800 F. Supp. 2d 262,
269 (D.D.C. 2011) (citing Donovan v. Agnew, 712 F.2d 1509, 1511
(2nd Cir. 1983)). Further, “[o]ne who is the chief executive
officer of a corporation, has significant ownership interest in
it, controls significant functions of the business, and
determines salaries and makes hiring decisions has operational
control and qualifies as an ‘employer’ for purposes of FLSA.”
Ruffin, 800 F. Supp. 2d at 269 (citing U.S. Dep’t of Labor v.
Cole Enters., Inc., 62 F.3d 775, 778 (6th Cir. 1995)).
Ms. Wilson’s complaint alleges that the individual
Defendants were officers of Hunam Inn, Inc. with “primary
responsibility for the operation and management of the
Establishment, including establishing working conditions and
controlling the schedule and wages paid to individuals working
for Defendant Hunam Inn, Inc.” Compl. ECF No. 1 at ¶¶ 3, 4.
According to Ms. Wilson, “Defendants hired Plaintiff and all
similarly situated bartenders, had the ability to discipline
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them, fire them, schedule them, and adjust their schedules and
wages.” Id. at ¶ 24. Further, Ms. Wilson alleges that the Cobalt
employees’ pay and “opportunity for wages and income was limited
to the pay method set exclusively by Defendants.” Id. at ¶ 26.
In moving to dismiss Plaintiff’s complaint as to themselves
individually, Defendants Mr. Little and Mr. Perruzza do not
dispute that they are corporate officers of Hunam Inn, Inc.
Defs.’ Mot., ECF No. 8-2 at ¶¶ 3, 4. Defendants’ only argument
is that Ms. Wilson’s complaint is legally insufficient because
her allegations are “nothing more than a formulaic recitation of
various prongs of the economic reality test” and that her
allegations are “insufficient to raise Plaintiff’s right to
relief above a speculative level.” Id., ECF No. 8-3 at 7.
Mr. Little is the owner of Hunam Inn, Inc. Compl., ECF No.
1 at ¶ 3. A Defendant’s ownership interest in an employer
corporation, while not dispositive of employer status under the
FLSA, certainly raises a plausible inference that the individual
possessed the requisite “operational control” over the covered
entity. See Ruffin, 800 F. Supp. 2d at 269; Villar, 664 F. Supp.
2d at 97 (D.D.C. 2009).
As Vice President of Hunam Inn, Inc., Mr. Perruzza is a
corporate officer. Corporate officers are liable as employers
under the FLSA as long as the officer acts, or has the power to
act, on behalf of the corporation vis-à-vis its employees. See
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Donovan, 712 F.2d at 1511 (citing Donovan v. Sabine Irrigation
CO., Inc., 695 F.2d 190, 194 (5th Cir. 1983) (abrogated on other
grounds)); see also Finke v. Kirtland Cmty College Bd. of
Trustees, 359 F. Supp. 2d 593, 598-599 (E.D. Mich. 2005).
In sum, Ms. Wilson alleges that Mr. Little and Mr. Perruzza
supervised Ms. Wilson’s working conditions and controlled her
schedule and wages. Compl., ECF No. 1 at ¶¶ 3, 4. They had the
ability to hire and fire the corporation’s employees and to set
their wages and schedules. Id. at ¶¶ 24, 26. These allegations
are sufficient to state a plausible claim under the economic
reality test. Accordingly, Defendants’ motion to dismiss the
complaint as to Mr. Little and Mr. Perruzza is denied.
B. Given the fact-intensive nature of the willfulness
inquiry, dismissing Ms. Wilson’s “third-year” claim prior
to discovery would be premature
Defendants argue that Plaintiff has failed to allege facts
capable of supporting an inference of willfulness and seek
dismissal of the complaint as to her “third year” claims. Defs.’
Mot., ECF No. 8-3 at 8-9. Ms. Wilson claims that the Defendants’
failure to pay minimum wage for non-exempt work, failure to
provide notice of the use of the tipped-employee exemption, and
failure to allow bartenders to retain their tips in full
demonstrate a “willful violation” of the applicable law, thereby
entitling her to a third year of damages. Compl., ECF No. 1 ¶¶
62, 67.
10
The FLSA contains a two-year statute of limitations on
actions to enforce its provisions, but allows a three-year
limitations period for a “cause of action arising out of a
willful violation.” 29 U.S.C. § 255. A violation is willful
where the employer “either knew or showed reckless disregard for
the matter of whether its conduct was prohibited by the
statute.” McLaughlin v. Rickland Shoe Co., 486 U.S. 128, 133
(1988); see also Saint-Jean v. District of Columbia, 846 F.
Supp. 2d 247, 255 (D.D.C. 2012). Courts have found willful
violations in cases where the Defendant knew the FLSA applied,
but made no effort to ascertain whether their payroll practices
complied with the law. See Ayala v. Tito Contractors, -- F.
Supp. 3d --, No. 13-CIV-1603, 2015 WL 968113, at *3 (D.D.C. Mar.
4, 2015).
The determination of willfulness for purposes of the FLSA
is necessarily fact-specific. Figueroa v. District of Columbia,
923 F. Supp. 2d 159, 167 (D.D.C. 2013). As such, the issue of
willfulness is often left to the ultimate trier of fact. See
Figueroa, 923 F. Supp. 2d at 167; Youngblood v. Vistronix, Inc.,
No. 05-CIV-21, 2006 WL 2092636, at *5 (D.D.C. July 27, 2006);
Wright v. U-Let-Us Skycap Servs., 648 F. Supp. 1216, 1218
(D.Colo. 1986). Indeed, some courts consider determination of
the willfulness issue wholly inappropriate at the motion to
dismiss stage. Acosta Colon v. Wyeth Pharm. Co., 363 F. Supp. 2d
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24, 29 (D.P.R. 2005); see also Hunter v. Sprint Corp., 453 F.
Supp. 2d 44, 54 (D.D.C. 2006)(“a determination about the
applicable statute of limitations cannot precede a determination
that the employer is, in fact, liable.”). Other courts have
allowed a Plaintiff’s complaint to survive a 12(b)(6) motion so
long as the Plaintiff’s complaint contains an allegation of
willfulness and the facts of the complaint, taken as a whole,
“support more than an ordinary FLSA violation.” Mitchell v. C &
S Wholesale Grocers, Inc., No. 10-CIV-2354, 2010 WL 2735655 at
*12 (D.N.J. July 8, 2010).
The Court finds it plausible on the facts alleged that Ms.
Wilson will be able to demonstrate a willful FLSA violation.
Here, Plaintiff alleges a fairly elaborate tip pooling scheme
wherein Defendants (1) fired those employees to whom they would
have to pay minimum wage, such as the cleaning staff, (2)
required their bartenders to perform cleaning duties, for which
the bartenders were neither tipped nor paid minimum wage, and
(3) required the bartenders to share their tips with non-tipped
employees. Compl., ECF No. 1 at ¶¶ 16-23. As Defendants
acknowledge, the ultimate merits of Plaintiff’s minimum wage
claim will turn on whether the scheme employed by Defendants
complied with the FLSA’s “tipped employee” exemption. Defs.’
Mot., ECF No. 8-3 at 12. Defendants maintain that their policy
is compliant. Id. at 2 n.2, 12.
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The Court need not comment on the propriety of the
Defendants’ tip pooling scheme for purposes of ruling on this
motion. Regardless of the ultimate outcome on that issue, Ms.
Wilson alleges that Defendants never notified her that
Defendants would be using the tipped employee exception to the
FLSA’s minimum wage requirement, 3 and she alleges that she was
never paid overtime for work performed in excess of 40 hours per
week. 4 Id. at ¶¶ 16, 60. Discovery on these allegations will
inform the determination of whether or not these violations were
willful. Accordingly, Defendants’ motion to dismiss Plaintiff’s
third-year claims is denied.
C. Ms. Wilson is entitled to discovery on her overtime
claims
The Defendants argue that they are entitled to summary
judgment on Ms. Wilson’s overtime claims because, according to
Defendants, Ms. Wilson never worked more than 40 hours per week.
Defs.’ Mot., ECF No. 8-3 at 10. In support of this contention,
Defendants attach a declaration from Steven Smith, payroll
manager for Hunam Inn, Inc., and a series of photocopies
purporting to be Plaintiff’s time records. Id. at 8-4, 8-5. In
3 The FLSA includes a notice requirement for employers intending
to use the “tipped employee” exemption to the minimum wage
requirement. 29 U.S.C. § 203(m).
4 Under the FLSA, all employers are required to pay time and a
half for each hour in excess of forty hours per week that an
employee works. 29 U.S.C. § 207.
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his declaration, Mr. Smith provides that “[e]ach week the bar
managers provide me with time records of the bartenders,” and
that “[a]ccording to the time records, Ms. Wilson never worked
more than 40 hours in a workweek in the time period reflected in
the records.” Id., ECF No. 8-4 at ¶¶ 2-3. The attached records
do not reflect Plaintiff working in excess of 40 hours per week
during any workweek reflected in the records. Id., ECF No. 8-5.
Plaintiff argues that she needs discovery to test the veracity
of Mr. Smith’s claims and the accuracy of the purported time
records. Pl.’s Op. at 18.
Generally, courts are reluctant to consider a motion for
summary judgment prior to discovery. Convertino v. Dep’t of
Justice, 684 F.3d 93, 99 (D.C. Cir. 2012) (“summary judgment is
premature until all parties have had a full opportunity for
discovery”)(internal citations and quotation marks omitted);
Americable Int’l v. Dep’t of Navy, 129 F.3d 1271, 1274 (D.C.Cir.
1997)(“summary judgment ordinarily is proper only after the
[P]laintiff has been given adequate time for
discovery”)(internal citations and quotation marks omitted).
Upon review of the parties’ filings, the Court concludes
that Defendants’ motion for summary judgment is premature. Ms.
Wilson should be allowed to develop her claims through
discovery. Further, Rule 56(c) requires that an “affidavit or
declaration used to support or oppose a [summary judgment]
14
motion must be made on personal knowledge. . . .” Mr. Smith’s
declaration that Ms. Wilson never worked more than 40 hours per
week is not based on personal knowledge, rather Mr. Smith
acknowledges that his statements are made based on records
provided to him by the bar manager. Defs.’ Mot. 8-4. Mr. Smith
expresses no opinion as to the accuracy of the purported
records, how the records were completed or maintained, or
whether Plaintiff was allowed to report all the time she worked.
Ms. Wilson is entitled to discovery to test the accuracy and
authenticity of Defendant’s exhibits. 5 Accordingly, Defendant’s
Motion for Summary Judgment as to Ms. Wilson’s overtime claims
will be denied without prejudice as premature.
D. Ms. Wilson is entitled to discovery on whether the
individual Defendants are her employers under the FLSA
and DCMWA
As stated above, Ms. Wilson has plausibly stated a claim
against Mr. Little and Mr. Perruzza under the economic reality
5 Defendants make much of the fact that Plaintiff’s Rule 56(d)
Declaration is silent as to her overtime claims. Defs.’ Rep.,
ECF No. 11 at 15-17. Defendants argue that by failing to address
this point in her declaration, Plaintiff has effectively
conceded her lack of overtime work as undisputed. Id. at 15.
Such a result is unnecessary. “[D]istrict courts should construe
motions that invoke [Rule 56(d)] generously, holding parties to
the rule’s spirit rather than the letter.” Conventino, 648 F.3d
at 99; see also Richie v. Vilsack, 287 F.R.D. 103, 106-07
(D.D.C. 2012)(denying Defendant’s summary judgment motion and
allowing Plaintiff to proceed to discovery on both her
discrimination and retaliation claims, even where Plaintiff’s
Rule 56(d) declaration was silent as to her retaliation claims).
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test. Further, in light of the broad policy of allowing both
parties an adequate opportunity for discovery prior to ruling on
a motion for summary judgment, Defendants’ motion is premature
at this time. Should the evidence ultimately reveal that
defendants are not, in fact, Ms. Wilson’s employers, defendants
remain free to renew their motion for summary judgment upon the
close of discovery. Accordingly, Defendants’ motion for summary
judgment as to Mr. Little and Mr. Perruzza will be denied
without prejudice.
IV. CONCLUSION
For the foregoing reasons, Defendants’ Motion to Partially
Dismiss Plaintiff’s Complaint or, in the alternative, for
Partial Summary Judgment is DENIED. An appropriate order
accompanies this Memorandum Opinion.
Signed: Emmet G. Sullivan
United States District Judge
September 1, 2015
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